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8 Challenges Fintech Startups Should Be Ready to Face

“Can Fintech change how traditional banks function?”

“What effects will it have on the global economy in the long run?”

“Can Fintech match the stability and reliability of traditional banking systems?”

Most people have these questions when they first hear about fintech. However, with the right approach, fintech can be one of the biggest technology trends and can undoubtedly revolutionize banking.

Hundreds of new fintech startups have raised billions of dollars from investors. The valuation of this market is increasing rapidly, and by 2028, we can expect it to reach $332.5 Billion. While the possibilities of this technology trend are endless, there are also multiple challenges that startups and small-sized fintech companies might face in the near future:

Challenges Faced by Fintech Startups

1. Creating a Highly-Functional Mobile App and Website

Users will be interacting with your fintech service through a website or app. Therefore, your startup should have a team of highly-skilled developers, QA engineers, UI/UX designers, and fintech experts. But, if your startup doesn’t have enough funds to hire an in-house team, you can opt for a fintech app development service.

Smartphones and handheld devices have many hardware and software features like NFC, QR-code scanning, and two-factor authentication that fintech apps can use to improve convenience and functionality further. 

2. Winning and Maintaining Customer Trust

Trust is the most crucial element in any fintech business. If there’s even a slight delay or failure in transactions, the user will start having doubts about your service. Your target audience has been using the traditional banking system for decades. Hence, you can’t make them use financial technology without winning their trust. They’ll only use your service regularly when it’s reliable and convenient. Thus, you should ensure robustness and stability while creating your company’s app, website, and overall digital infrastructure.

3. Data Security

A fintech service can’t afford to lose its data to cyber-attacks. Therefore, it’s important to create a robust data security system and hire a team of highly experienced cybersecurity experts, penetration testers, and ethical hackers to keep your system safe from various security threats. 

Suppose you don’t have the budget to hire an in-house team of cybersecurity experts. In that case, you can opt for the services of a company that provides exceptional fintech services.

4. Blockchain Integration

Most fintech companies have integrated blockchain into their system to improve the security and efficiency of transactions. People have mixed opinions regarding blockchain. Some consider it the future of safe data exchange, while others believe it didn’t live up to its hype. However, blockchain does make transactions a lot more secure and reliable. It tracks all stages of the transaction and prevents changes. This is why transferring money through a blockchain-based network is far more secure than transferring it through banks.

However, integrating blockchain into your app and overall fintech infrastructure can be costly. Also, there aren’t many blockchain experts on the market. If you can’t afford to invest that much, you should outsource such tasks to a fintech development company specializing in blockchain. 

5. Compliance With Local Laws and Regulations

Most of us have used the traditional banking system for many years. Hence, governments find it easier to trust this system and keep track of the transactions happening through banks. However, most governments are yet to adapt to fintech advancements, and every country imposes different laws and regulations on this industry. Even if your fintech app doesn’t use blockchain, complying with government regulations will still be a rather taxing task for you. So, before launching your fintech service or app in a country, ensure your processes don’t violate any laws. 

For better legal advice, you should hire a legal consultant or attorney. Make sure they’re aware of the government’s latest policies regarding banking and finance. 

6. Integrating AI and Big Data

Fintech not only makes banking more convenient, but it also automates many processes through AI and Big Data. Banks usually record and organize user information like their name, social status, family members, and transactions. However, with the help of Big Data and AI, fintech apps will also be able to collect user information like their habits, financial behavior, in-app activity, etc. It’ll change how banks manage transactions, interact with customers, handle requests, and gather information.

Big Data and AI will also help apps customize the user experience, detect fraudulent activities, manage transactions, and perform risk analysis automatically.

7. Creating Effective Marketing Strategies

You can’t just launch a fintech app on Play Store or App Store and expect users to start downloading and using it straight away. You should create an effective marketing strategy to acquire customers. As mentioned previously, fintech businesses rely on customer trust. If your marketing campaign is not making your service look trustworthy, you’ll lose your target audience to your competitors. 

You should promote your fintech app effectively and boast the features your competitors aren’t offering. You can launch promotional offers and try different advertising methods to improve your brand’s popularity and awareness. To retain customers and enhance your reputation, you should also have an excellent after-sales team providing prompt customer support. 

8. Creating a Successful Business Model

Ultimately, the success of your fintech app comes down to your business model. It should address user demands and offer well-developed features that make their experience more convenient and seamless. If you’re creating an in-house team, hire the best developers, QA engineers, UI/UX designers, and testers. You should also invest a considerable amount for marketing and advertisement purposes. Try presenting an attractive minimal viable product (MVP) to your investors and clients before launching the full-fledged version of your app or website. Lastly, keep introducing new features and updating your app or website’s interface and functions to stay ahead of the competition. 

Whether you’re a massive enterprise looking to disrupt the fintech market or a startup looking to create an impact with a minimal viable product (MVP), we recommend outsourcing your app development and financial services to one of the best fintech app development companies in the US.

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